Bankers: First Data IPO Rapidly Approaching

FBN’s Charlie Gasparino argues top firms believe payment processing company First Data’s IPO could be among the most lucrative deals in upcoming months.

Wall Street’s top firms believe the initial public offering of First Data Corp., a little known payment processing company, could be among the most lucrative deals in the coming months, generating as much as $40 million in fees, the FOX Business Network has learned.

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Officials at First Data, a company that works with banks and merchants in the field of processing payments, led by its chief executive Frank Bisignano, have been meeting with investment bankers in recent weeks about a possible financing over the next 12 months that would include not just a public offering, but also a restructuring of First Data’s debt, according to people with direct knowledge of the matter.

Private equity firm KKR & Co. (NYSE:KKR) took First Data private in 2007 in a $30 billion transaction hatched just before the financial crisis began to squeeze such financings. In the subsequent years, First Data came to drag on KKR’s balance sheet so much that the private equity firm pumped another $1.2 billion into the company this summer.

The June 2014 financing was designed to prop up First Data’s value, primarily by reducing its debt load—a precursor for an IPO at some later date, bankers say.

That date is rapidly approaching, bankers who have been dealing with First Data officials tell FOX Business. The company, through its CEO Bisignano, has been suggesting that KKR wants to cash out of the investment in the next year if possible. First Data officials have indicated that the company represents as much as 10% of KKR’s balance sheet and is its biggest investment—a number neither KKR nor First Data press officials would deny.

Press officials for KKR did not return calls for comment and First Data declined to comment on the company’s financing plans, but would not deny that an IPO is being considered in the coming months.

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Speculation about the possible First Data IPO has been heating up since 2013 when the firm brought in Bisignano as its CEO after a long career on Wall Street, mainly at mega banks Citigroup and JP Morgan Chase. Bisignano is widely regarded as among the most knowledgeable Wall Street executives in the field of “operations,” coordinating everything from office relocations to the bank’s technology infrastructure.

In recent months, Bisignano has increased his public profile, in preparation bankers say, for the likely IPO. In a speech in early November, Bisignano told a group of technology investors that First Data has strengthened its balance sheet and how it launched dozens of new products.

Still there are skeptics who point to First Data’s massive levels of debt-- $20.7 billion at the end of September of this year, according to financial documents. Much of that debt, bankers say, carries high interest payments, which could weigh on the pricing of any public offering.

Still, bankers believe the debt, combined with selling of public shares, will be a bonanza for Wall Street, which is why so many executives have been meeting with Bisignano of late. The all-in cost of restructuring First Data’s balance sheet along with selling the IPO could produce $25 million to $45 million in fees, far lower that the gross fees of about $170 million shelled out during Facebook’s 2012 IPO, but significant nonetheless, they say.

Facebook, for example, raised $16 billion in its IPO, thus shelling out just over 1% of the deal in fees—a percentage considered on the far low end of the fee scale. Wall Street bankers say Bisignano hasn’t speculated on an IPO size, but they expect the higher fee level combined with the balance sheet restructuring to make a First Data deal more lucrative on a percentage basis.

“The fees on this thing is why every Tom, Dick and Harry banker is up Frank’s rear end these days,” said one Wall Street executive with knowledge of the matter.